The strength of the Philippines’ macroeconomic fundamentals is creating a bigger role for the country in the Association of Southeast Asian Nations (Asean), with its integration into the region aided by its growth in trade and investment, debt, equity, tourism and migration, the Asian Development Bank (ADB) said.
The “Philippines’ integration with Asia is increasing,” Iwan Azis, head of the Office of Regional Economic Integration at the ADB said at the launch of the bank’s “Asian Economic Integration Monitor” on Tuesday.
The ADB cited the Philippines’ position as one of the top five Asean countries in terms of economic growth, foreign direct investment, exports, competitiveness, logistics, ease of doing business, government effectiveness, credit ratings, banking sector, education system, remittances and dollar reserves.
“The Philippines plays a major role in Asean. In fact, the country is ranked among one of the highest in Asean on a number of things like quality education and on macroeconomic performance. Its growth rate is also among the highest in Asean countries,” he said.
Since the Philippines plays a major role in the Asean region because of its strong macroeconomic fundamental story, the country’s integration with Asia is also improving in terms of trade, investments, debt, equity, outbound migration, and tourist arrivals, he added.
Govts bolstering connections
ADB’s report—the Asian Economic Integration Monitor—said Asia is set to become increasingly integrated as governments bolster trade and transport connections, as well as build regional institutions, such as free trade agreements, regional bond market arrangements and financial safety nets that can avert the kind of dangers that have beset integration in other parts of the world.
“Despite tepid global growth, Asia’s regional integration continues to deepen, with crossborder trade and investment flows, holdings of Asian financial assets, and migration and tourism stable or growing; regional cooperation between governments also continues to strengthen,” it said.
The report also highlighted the fact that the region’s trade integration, after reaching high levels during the first decade of the new millennium, has stabilized despite weaker intermediate goods trade, a growing shift in Japanese production to the region, and rising trade impediments.
In this regard, policies that strengthen domestic and regional demand are increasingly important, it said.
Mega-regional trade deals
The ADB report also suggested that “mega-regional” trade agreements could help consolidate many bilateral free trade agreements, although any early pact remains remote.
On the other hand, Asian financial assets continue to draw investors from both within and outside the region, and the share of intraregional financial assets continues to grow, with investors expanding debt holdings while reducing their share of equities, it said.
Intraregional bank lending to Asia also continues to strengthen with increased lending from Australia, Japan, and other non-traditional Asian lenders, thus providing greater liquidity and buffers to cope with possible financial market volatility.
To cope with a slower global economy, the region continues to harmonize financial rules and regulations and further liberalize trade and investments unilaterally or through multi-country free trade agreements.
These pragmatic and market-friendly institutions should help Asia grow strongly as a region even as individual countries must continue with reforms to overcome structural weaknesses, it added.
Lastly, the ADB report stressed that regional cooperation remains critical for increasing new infrastructure, but the substantial gap between what is needed and what is in the pipeline is widening.
“Innovative mechanisms are urgently needed to help mobilize public finance, attract greater private sector participation and tap additional sources of long-term capital, including new regional financing initiatives,” it added.